'The Land Of The Giants’: Atlanta's Red-Hot Data Center Industry Could Face Growing Pains
Big tech companies are turning Atlanta into a global data center hub, with the market continuing to grow at a rapid clip. But industry insiders say Atlanta operators need to start preparing for the challenges that have hit the country's largest data center markets.
Just over two years into Atlanta’s data center building boom, the region’s data center footprint is set to more than double as the market becomes one of the country’s most important digital hubs. Cloud and social media hyperscalers have driven this demand, sparking the emergence of a dense regional data center ecosystem that is continuing to grow as Atlanta becomes the digital infrastructure epicenter for the Southeast.
Shortages of land and power in other major data center markets have pushed developers toward Atlanta. But industry insiders — speaking at Bisnow’s DICE Southeast event earlier this month at the Hilton Atlanta – warn that these same power and land constraints may be on the horizon in Georgia. They say operators need to plan accordingly, because the Atlanta market’s growth isn’t slowing down any time soon.
“We are seeing a lot of activity pick up just in the last year, as Northern Virginia presents challenges, folks are going to come down here,” Robbie Sovie, executive vice president for development & construction at T5 Data Centers, said at the event. “As a developer we chase the hyperscalers, and they’re all here. There's a lot of activity in the market, and it's going to continue to grow from a development perspective and continue to expand.”
While the data center sector has experienced unprecedented growth since the outbreak of the pandemic in 2020, that growth has been particularly striking in Atlanta. While just the eighth-largest market by total inventory with 338 megawatts of capacity, according to data from JLL, Atlanta saw absorption skyrocket by a factor of 10 between the first half of 2021 and 2022, adding 97 megawatts of leasing in the first half of this year.
Atlanta’s data center inventory is set to nearly double in the months ahead with a 302-megawatt development pipeline. The market’s 175 megawatts of data center space currently under construction is up from just 30 megawatts at the same time last year, according to JLL.
This growth has been driven primarily by hyperscalers — cloud providers, social media companies and other tech giants with massive computing needs — drawn to the region by the low cost of land and power, statewide tax incentives, and proximity to Atlanta’s growing population and business community, experts say.
Major hyperscalers like Meta and Microsoft have their own campuses near Atlanta, while the major colocation operators like QTS and Digital Realty are building out new space as quickly as possible, mostly to provide additional capacity for the social media and cloud giants.
This influx of hyperscalers, in turn, has attracted an ecosystem of smaller colocation operators like DataBank and DC BLOX to the region. They have come to Atlanta and surrounding submarkets as enterprise tenants and other IT operators aim to place servers close to cloud infrastructure for better performance and cheaper interconnection.
Industry insiders point to Atlanta as perhaps the best example of a fundamental transformation taking place across the digital infrastructure landscape.
The evolution of the largest traditional data center hubs — from Loudoun County, Virginia, to Chicago to Silicon Valley — was shaped by the needs of the major telecommunications firms that supported the internet. Now, cloud providers are the dominant force, driving the construction of data centers, fiber networks and other digital infrastructure.
These hyperscalers account for around 80% of new demand, according to JLL, and are reshaping the data center map in their image by building out their own fiber networks, and making the areas with their densest deployments into the hubs, like Atlanta and Phoenix, that the rest of the industry builds around.
“This is the land of the giants,” said Jeff Uphues, CEO of data center provider DC BLOX. “Operating out of Atlanta today, it's all about how it feeds into Atlanta, which is also driving additional growth. You’re very rarely seeing large companies say they don’t need to have something into Atlanta.”
Atlanta’s growth has also been boosted by power and land constraints in those more traditional data center hubs, a trend that began even before the revelation this summer of unexpected power shortages in Loudoun County, experts say.
Compared to a place like Northern Virginia, finding developable land with access to power in Georgia is relatively easy. More land means lower prices, and fewer complications like local opposition or the need to design multistory data centers to squeeze capacity into a smaller footprint — measures that are becoming increasingly common in markets near the limits of their data center carrying capacity. Panelists at DICE Southeast said Atlanta is increasingly seen as an easier, less expensive development alternative.
“Atlanta has been sort of under the shadow of Northern Virginia for a decade or so,” said Chris Downie, CEO of data center operator Flexential. “But with some of the constraints on land and power, I think you'll see a tremendous amount of the content that used to be concentrated elsewhere drive a lot of growth throughout the Southeast.”
While the problems facing markets like Northern Virginia are helping push data center development in Atlanta, that accelerated growth means those same constraints could emerge in Georgia in the not-too-distant future. With some DICE Southeast panelists projecting as much as 70 megawatts of annual growth in Atlanta for the next five years, they say the same power issues facing Loudoun County lie in Atlanta’s future, unless local utilities and the data center industry take steps to avoid it.
“It’s not a problem in Atlanta yet — and yet is the key word — but what happened in Loudoun County didn't happen overnight,” said Terry Rennaker, vice president for hyperscale development at Equinix. “While Atlanta looks really good now and probably will for at least a little while into the future, it behooves people to be looking ahead and solving for the longer term, because the investment and infrastructure lags significantly our take-up. When you’re building data centers that are 50 or 100 megawatts and you’re taking down the existing capacity in those kinds of chunks, it gets used up rather rapidly.”
While power constraints like those seen in Virginia may be far off, the impact of Atlanta’s maturation as a data center market is already being seen as developable land becomes less abundant. According to JLL, large blocks of space and power have diminished due to pre-built commitments, and the cost of land is rising.
The consensus among panelists at DICE Southeast was that rising land prices aren’t currently a deterrent for the vast majority of developers, but they could soon change the development equation considerably as the region sees more public pushback on data centers and developers are forced to build more expensive, multistory projects on smaller parcels.
Kurt Lindorfer, founder of data center builder Paradigm Structural Engineers, said this reality may not be imminent, but as Atlanta becomes a denser data center hub, it’s an inevitability.
“It’s coming to Atlanta,” Lindorfer said. “The price of land is coming up here, so building to two or three stories is something that people should be ready for.”